Why Fitness Is The New Hot Marketing Platform And Revenue Stream For Music

Earlier this month, Michael Simon, president and CEO of rights management company Harry Fox Agency, was taking an on-demand indoor cycling class with Peloton when the instructor started playing a song that Simon had never heard before, by a band he hadn't had the chance to explore in greater depth.

The song was “Gettin' Tighter” by iconic hard-rock band Deep Purple, from their 1975 album Come Taste the Band — the perfect addition to a '70s-rock-themed workout.

“I liked it enough to remember it, and listened to the whole record over and over again the next day in the office,” Simon told me. “People were laughing at how I made this brilliant ‘discovery’ of a band that’s been around for 40 years. But the most important thing is that I didn’t make that discovery on satellite ratio, nor on a streaming service or through any user-generated content. It was through a fitness class.”

In other words, an upbeat Peloton ride had the core benefit of a tough workout, but the added benefit of lean-in music curation in a high-energy, high-endorphin environment. “It expanded my experience of that band, and now it’s also affecting how recommendation algorithms are responding to my streaming account,” said Simon. “That dynamic is creating a wholly different music ecosystem.”

Simon is on to something both old and new. Years of research have shown that music can both enhance athletic performance and increase stickiness and engagement in retail and software settings. What feels newer is the extent to which founders and investors are now turning that research into capital flows. Over the past two months alone, fitness and music companies have been striking deals together at an unprecedented pace — creating new revenue streams for artists and songwriters and bolstering engagement for both incumbent and emerging fitness businesses hungry for innovation.

Consider this timeline: On May 22, licensing and rights-verification company Rumblefish (owned by Simon’s HFA) announced that it would be working with ClassPass, the health-club subscription service that just raised $85 million in a Series D round, on music rights administration support for on-demand fitness content. Just over a week later, B2B music-streaming provider Feed.fm announced its brand-new spinoff product Fitness.fm, which is already crafting custom music experiences for popular mobile fitness apps like Daily Burn, ASICS Studio and Pear Sports.

The end of June saw yet more fitness and music deals. First, audio-workout startup Aaptiv raised $22 million from investors including Warner Music Group, and it later revealed an additional strategic investment from Bose Ventures. One week later — to come full circle — Peloton announced its acquisition of B2B music aggregator Neurotic Media, whose team will be tasked with building new music features for the unicorn cycling startup.

Why is this trend gaining so much ground? Answering that question requires a deep understanding of how both sides of the story, namely fitness and music, have transformed rapidly and in parallel over the last several years. On one hand, fitness companies, traditionally reliant on physical equipment and brick-and-mortar club memberships for revenue, are investing more aggressively in software and multimedia content to retain users, and need to acquire the appropriate rights across the board. On the other hand, the recorded-music industry, currently experiencing its fourth consecutive year of growth thanks to paid streaming services, are more eager to experiment with revenue streams and create new contexts for their artists and catalogs.

Together, it’s almost as if these two stories were meant to be.

PALM SPRINGS, CA - APRIL 15: Guests workout at the SoulCycle studio at the American Express Platinum House at The Parker Palm Springs on April 14, 2017 in Palm Springs, California. SoulCycle and other popular indoor-cycling studios have popularized the notion that fitness classes are as entertaining as they are sweat-inducing. (Photo by Ari Perilstein/Getty Images for American Express)

THE NEW FITNESS INDUSTRY: ON-DEMAND, PERSONAL AND MULTIMEDIA ENTERTAINMENT

The U.S. fitness industry is not starved by any means, its market value having hovered around $80 billion for the past four years. Yet the majority of these revenues are going to brick-and-mortar gym memberships and/or one-off payments for home equipment such as treadmills and weights, not to wearables or software.

According to the Consumer Technology Association, portable consumer fitness tech (activity trackers, smartwatches, personal sound amplification products, smart basketballs and baseball bats, etc.) will generate around $6.4 billion in sales this year in the U.S.—a 10% increase year-over-year, but still only eight percent of the national fitness market. On the software side, fitness apps are expected to bring in just $619 million in revenue, which isn't even one percent of the wider fitness market.

But for fitness companies looking to disrupt themselves, those lower financial statistics might be beside the point.

With brick-and-mortar gyms, for example, it’s certainly not a new problem that the majority of customers end up overpaying for the amount of time they actually show up. Traditional gyms have arguably designed their business model that way from the start: for instance, as of 2016, Planet Fitness has an average of over 6,800 members per physical location, even though each location can only fit a few hundred people max. Meanwhile, in the home-equipment space (with Life Fitness, Nautilus and TechnoGym among the market-leading companies), treadmills and other equipment have an average lifespan of seven to twelve years, putting pressure on manufacturers to generate recurring revenue after selling their core product.

The above scenarios demonstrate a problematic gap between revenue and actual engagement in fitness, which explains why more mobile, on-demand and personalized software and content offerings are now all the rage. Gyms like Equinox and TRX already have their own apps for booking classes and tracking activity, but more startups are also launching standalone audio-workout apps, catering to users who still want to work out when traveling, on vacation or generally pressed for time.

Just yesterday, ClassPass launched a new free standalone audio-workout app called ClassPass Go, featuring over 400 on-demand classes and counting, in an attempt to court a wider user base beyond just those who opt to show up to studios in person. Feed.fm is the official white-label music provider for the app.

“Audio workouts are one of the fastest growing categories in digital fitness given the convenience and flexibility,” ClassPass CEO Fritz Lanman said in a statement, adding that “audio was a natural progression in giving our members more ways to work out and non-members a reason to try us as we continue to flex our muscle in the digital category.” (ClassPass declined to comment for this article.)

Even if this shift isn’t yet being reflected in revenue, consumers are meeting it halfway. According to Flurry Analytics, fitness app usage has skyrocketed by 330% over the last three years. Because of the health benefits of regular exercise, these apps also create sticky habits: over 75% of fitness app users open these apps at least two times a week, while more than 25% of users access their apps more than 10 times a week.

The right music can keep these users even more engaged in the long term: new research released this week from Feed.fm found that users of fitness apps with specialized music curation were 2.2x more likely to return the following month and 2.8x more likely to return the following quarter

Perhaps most strikingly, Flurry Analytics found that 96% of users choose to use only one fitness app on a regular basis—implying both fierce user loyalty and high market fragmentation with little opportunity, or willingness, to experiment. The new fitness, just like music has always been, is more personal than ever.

The Spotify application is seen on an iPhone in this photo illustration on June 18, 2018. (Photo by Jaap Arriens/NurPhoto via Getty Images)

THE NEW MUSIC INDUSTRY: CONTEXT-DRIVEN STREAMING EXPERIENCES

After nearly a decade of continuous decline in the wake of piracy, the U.S. recorded-music industry finally rebounded in 2016, thanks largely to the popularity of streaming services like Spotify and Apple Music.

“What’s amazing is that all of that growth was consumer-based,” Jeff Yasuda, CEO of Feed.fm, told me. “It’s all because of consumers streaming more and more music through a variety of apps. Now people are also waking up and asking, ‘What about the B2B side?’ Sure, Spotify and Apple Music will continuously fight for real estate and mindshare with listeners, but what about weaving music into where listeners already are, in their daily grind?”

Indeed, emerging out of an historically rocky relationship with the startup community, record labels and publishers are cutting friendlier licensing deals with entrepreneurs who want to experiment with new forms of music delivery.

“There was a time when no one would be interested in granting rights to a company that wasn’t going to get their music on the radio, or synchronized to film or TV,” said Simon. “It was kind of weird to think about ancillary exploitation. Now, while independent creators will have their own opinions about how they want their works to be experienced and commercialized, the dam has burst in terms of publishers and labels vigorously pursuing every kind of opportunity, because who really knows? Who knew UGC would be this big? Who knew there would be someone teaching a cycling class with a camera staring at them, and you could watch them from a bike in another state?”

As traditional genre boxes also break down among consumers—a recent survey found that 85% of millennials say their music taste doesn’t fall into one specific genre or category—context has come forth as a dominant paradigm for music curation. Some of Spotify’s top mood and activity playlists, like Beast Mode and Young, Wild & Free, attract more engagement (and hence more regular revenue for the featured artists) than genre-based playlists, even if the former have fewer followers. Smart speakers like the Amazon Echo are encouraging voice commands that otherwise seem ridiculous in text-search environments, like “play music for cooking,” to become more commonplace among lean-back consumers.

Where does fitness come in? From a music-marketing perspective, the right workout playlists can be surprisingly potent at breaking down traditional demographic and geographic boundaries around certain genres or styles of music, expanding the potential real estate and audience for campaigns.

“Depending on your demographic, you might be a fanatic about in-home exercise, but not about Spotify or other similar music services,” said Simon. “You might be a passive listener to Triple-A [adult album alternative] radio who’s not exposed to the same music as someone who streams Spotify playlists ten hours a day on regular basis, and you might think that you don’t like any genres other than country or alt-rock. But then you do a spin class and get exposed to pop or EDM songs you’d otherwise never hear, and you end up liking it."

It goes the other way around too: “If you were born in the late ‘80s or early ‘90s, you might not otherwise get any exposure to the type of music that instructors play in ‘80s-rock classes,” said Simon. “It’s a great and refreshing way to bring that catalog forward into the next generation.”

Interestingly, few streaming services have nailed fitness experiences natively within their platform beyond static playlists alone. Spotify used to have a popular Running feature that offered personalized, crossfaded playlists that could be adjusted by BPM, but the company retired the feature in February 2018, to the dismay of many loyal users.

In recent history, the dominant streaming services have resorted mostly to integrations with third-party fitness-tech companies, the results of which have been mixed. Since November 2016, Spotify has offered users in select European markets a discounted bundle with meditation app Headspace, one of the top 10 free apps in the iOS App Store. Yet Fitbit, also a top-10 iOS fitness app, has integrations only with Pandora and Deezer as of press time, not with Spotify or Apple Music.

Apple may be the only tech company with the ability to control every step of the fitness/music interaction in-house—i.e. Apple Watch owners can set their own Workout playlists from Apple Music to start playing automatically whenever said owners start a workout, as tracked within the iOS Health app.

Ironically, however, nearly all fitness-music deals announced over the last few months did not involve the major streaming services at all. One possible theory as to why: tailoring music for athletic performance is a highly scientific endeavor that only more specialist companies can really master.

This is precisely why Feed.fm, who also works with retail clients like American Eagle and Charlotte Russe to power music experiences in their apps, decided to launch Fitness.fm as a separate product for the fitness market. “Fitness companies have very specific needs that are different from standard retail brands, like beat-matching, crossfading and BPM-based curation,” said Yasuda. “It makes no sense to have a high-intensity, fast-paced song during a cool-down, nor does it make sense to have a slow, ambient song during a high-intensity workout.”

HOW DO YOU PUT TWO AND TWO TOGETHER?

So what does the optimal fitness-music experience really look (and sound) like? While the answer may have well-researched, scientific underpinnings—e.g. lyrics are great for motivational workouts, instrumental songs without lyrics are better for classes with more technical instruction, syncing BPM with workout cadence delays perception of fatigue—one common misconception is that "music for fitness" is limited only to certain genres like EDM, rap and rock. As fitness preferences become just as personal as musical taste, what qualifies as "workout music" will become similarly heterogenous.

“'Fitness music' is not just EDM,” Chloe Raynes, Director of Music Licensing & Partnerships at Aaptiv, told me. “Music in a workout can be varied, interesting and complex. Every playlist can represent an emotional journey and tell a story, and be as amazing as it is unexpected. It becomes a significant part of the class as a whole.”

Cultish spinning studios like SoulCycle—which was founded by a former talent manager—pioneered the paradigm of fitness as entertainment, where instructors are paid as much to be DJs and performers onstage as they are to guide riders through proper form. Out of all the audio-workout apps on the market today, Aaptiv is arguably the most explicit about involving musicians themselves directly in the playlist curation process, taking that instructor-as-DJ trend one step further.

One of Aaptiv's first music partnerships was with Australian singer-songwriter Betty Who, who began using the app to squeeze in quick meditations and HIIT workouts while on tour. In partnership with her label at the time, Sony Music, Aaptiv designed a “Get To Know Betty Who” class a compiled a branded playlist with all of the artist's favorite workouts. “It was a great way to introduce our users to her music, and she was able to share the collection of classes she uses with her fans as well,” said Raynes.

Aaptiv has run similar campaigns with other artists like Bebe Rexha, Janine and The Chainsmokers, in part thanks to direct licensing partnerships with Sony and Warner Music along with a few independent labels. Raynes would not disclose how much these licensing deals cost, or whether deals with other labels like Universal Music were on the line—commenting only that music is a “significant investment” for Aaptiv.

In the general mobile-fitness market, there are two types of content that can create recurring revenue for the music industry: video (e.g. on-demand classes with Peloton and ClassPass Live), where the instructor or company usually has control over the music, and static or personalized audio (e.g. Aaptiv, ClassPass Go, ASICS Studio), where either the instructor or user can determine their music preferences.

But there's a small catch: under a statutory internet radio license, music experiences on fitness apps aren't completely on-demand, unlike what standalone paid music-streaming services offer. For instance, users of apps powered by Feed.fm and Fitness.fm can choose from several higher-level genres or styles, such as hip-hop/R&B, top-40 or even categories like "retro jams," but cannot choose to play a specific song by a specific artist at a particular time. That level of specificity requires direct deals with the labels or other rights holders in question, which can be much more costly.

On the other hand, one benefit of doing direct deals with rights holders is more marketing control and coordination from the rights holder's perspective. With Aaptiv, label partners like Sony and Warner “are sending us music and putting it on our radar before it’s released, as far as a month in advance, so that we can help develop campaigns around them,” said Raynes. “We’re also constantly looking for great music that’s already been out for a few months and that we already love.”

Some artists and cultural critics have voiced concerns about the rise of mood and activity playlists diluting and homogenizing the creative process, and funneling music into a narrower, more utilitarian function in people's daily lives. Fitness startups have responded to this concern by insisting that "fitness" in itself is not a viable standalone genre or marketing strategy, and that a widening market for workout apps will only invite more types of artists and sounds to get involved.

"I personally believe artists should make the music they want to make," said Raynes. "We're selecting music from all different genres, for all different types of music listeners, whatever we feel works best for a particular playlist or trainer. We're not looking for artists creating just 'music for fitness.' That wouldn't feel authentic."

NEXT STEPS: BIOMETRICS, EXPANSION INTO WELLNESS

Now that fitness is solidifying its place in the music market as a significant revenue stream, what are some of the next steps for technological innovation?

One increasingly active subcategory within fitness-tech involves biometrics: tailoring music and coaching in real time based on factors such as heart rate, pace and cadence. Several music startups such as Weav and Endel are building adaptive-music solutions that will inevitably bring on more fitness specialists as partners.

Many of the startups mentioned in this article also expressed enthusiasm about expanding beyond just a workout use case into the wider health & wellness market. “Music has a profound and well-researched impact on recreating neurological connections in the brain,” said Yasuda. “Fitness is a good way to keep people out of the doctor’s office, but what about people who had a stroke, or who need to learn how to walk and talk again? We’re going to keep studying music’s role in this space and expanding into other health parameters.”

As long as the fitness industry continues to create more multimedia content in the race towards convenience and personalization, and as long as the music industry continues to become more comfortable with experimentation beyond static streaming platforms in service of keeping up its newfound growth, we can only expect the intersection of these two spaces to blossom even more in the coming months.

I'm an award-winning music writer and researcher, passionate about propelling innovation in the music industry using a combination of in-depth business acumen and data-driven storytelling. I take particular interest in how emerging music markets, technologies, leaders and ta...